Impact of Laws and Regulations
The unanticipated application of laws and regulations to Sapporo Group businesses in the future could restrict business operations, with an adverse effect on operating results.
For example, should demand decline due to liquor and
consumption tax increases, or should regulations pertaining to liquor advertising, selling hours of liquor at liquor stores, or liquor sales locations spread, factors including expenses required for dealing with decreased demand and responding to new regulations could have a negative effect on business performance.
Risk of Litigation
The Sapporo Group strives to reduce violations and infringements of laws and regulations in its business operations by instilling a strong compliance culture through employee training and education.
However, there is a risk of litigation being brought against the Group in respect of a problem under product liability or intellectual property laws, irrespective of any violation of laws and regulations by Group companies or their employees in business operations in Japan or overseas. The instigation of a suit against the Group or its outcome could have a negative impact on the Group’s operating results.
Risk of Natural Disasters
The Sapporo Group could sustain damage as a result of a large-scale natural disaster or a secondary disaster. This could have a negative impact on the Group’s operating results such as by disrupting the supply of products.
Financial Liabilities
The Sapporo Group raises a significant portion of the funds it requires for various businesses through the issuance of corporate bonds and borrowings from financial institutions. Accordingly, the Group has a high balance of financial liabilities relative to total assets. Moreover, the Group’s financial liabilities may increase further as a result of large-scale investments accompanying the execution of its growth strategy.
In the event of an increase in market interest rates, or a down-grading of the Company’s ratings by ratings agencies, the Group’s interest expenses could increase or its fund-raising conditions could deteriorate. This could have a negative impact on the Group’s operat-ing results.
Retirement Benefit Obligations
The Sapporo Group calculates employees’ retirement benefit expenses and obligations based on actuarial assumptions, such as the discount rate and the expected rate of return on pension assets.
In the event of differences between actual performance and actuarial assumptions, or a change in these assumptions, the impact will be recorded as an actuarial difference on a cumulative basis and amortized over the average remaining period of service of employees at the time of accrual.
There would consequently be an impact on future retirement benefit expenses and the amount of retirement benefit obligations booked. Separately, the net retirement benefit obligations at transition, which arose upon a change in accounting standards for retirement benefits, is amortized over 15 years.
Loss on Impairment of Property, Plant and Equipment and Leased Assets
The Sapporo Group records impairment losses on property, plant and equipment and leased assets, and intangibles at the Company and consolidated subsidiaries in Japan in line with impairment criteria based on Japanese accounting standards for the impairment of fixed assets. Overseas, consolidated subsidiaries record impairment losses, as necessary, based on local accounting standards. However, going forward, the Sapporo Group may need to book additional impairment losses if assets meet impairment criteria due to changes in market and operating conditions or other factors, or the Company may need to book losses on sales and disposal of property, plant and equipment, depending on the sales price. This could adversely affect the Sapporo Group’s operating results and financial position.
Business and Capital Alliances
The Sapporo Group is promoting business and capital alliances with other companies worldwide as part of efforts to increase its competitiveness with a view to achieving growth in line with the Sapporo Group Medium-Term Management Plan. However, the Group may not achieve results as initially anticipated, depending on market conditions, changes in the business environment and other factors. In certain situations, the Sapporo Group’s operating results and financial position may be negatively affected in the event of deterioration in the business operations, assets and other aspects of an alliance partner or investee. In addition, the Sapporo Group may record the amortization of large amounts of goodwill in line with investments, or may record an impairment loss on goodwill and other assets due to deterioration in the business results of investees.
These factors could have a negative impact on the Sapporo Group’s operating results and financial position.
Holding Company Risk
Sapporo Holdings derives income from brand licensing fees and commissions for management guidance, as well as interest and dividends paid by Group operating companies.
Any deterioration in the financial position of Group operating companies could result in nonpayment, which could adversely affect Sapporo Holdings’ business performance.
Millions of yen
Thousands of U.S. dollars (Note 1)
ASSETS 2015 2014 2015
Current assets:
Cash and cash equivalents ¥ 10,399 ¥ 9,748 $ 86,274
Time deposits 31 33 258
Notes and accounts receivable—trade 92,335 89,246 766,014
Inventories (Note 5) 38,635 36,540 320,516
Allowance for doubtful receivables (64) (166) (534)
Deferred tax assets (Note 16) 4,458 5,000 36,980
Other current assets 10,570 15,972 87,693
Total current assets 156,365 156,373 1,297,201
Investments and long-term loans:
Investment securities (Notes 12 and 14) 61,848 59,969 513,092
Long-term loans receivable 9,016 9,151 74,801
Allowance for doubtful receivables (1,235) (1,305) (10,244)
Deferred tax assets (Note 16) 1,009 1,091 8,374
Other investments 15,363 13,573 127,451
86,002 82,478 713,474
Property, plant and equipment (Notes 6 and 14):
Land 105,121 115,291 872,087
Buildings and structures 383,087 387,645 3,178,091
Accumulated depreciation (213,568) (211,317) (1,771,758)
Machinery and vehicles 227,534 224,180 1,887,623
Accumulated depreciation (183,166) (180,302) (1,519,545)
Lease assets 15,498 16,826 128,572
Accumulated depreciation (7,739) (7,904) (64,204)
Construction in progress 6,638 2,618 55,067
Other 18,488 19,263 153,373
Accumulated depreciation (14,851) (15,702) (123,203)
Property, plant and equipment, net 337,042 350,597 2,796,104
Intangibles:
Goodwill 30,236 29,966 250,834
Other 10,743 6,025 89,127
40,979 35,991 339,962
Total assets ¥ 620,388 ¥ 625,439 $ 5,146,740
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
Millions of yen
Thousands of U.S. dollars (Note 1)
LIABILITIES AND NET ASSETS 2015 2014 2015
Current liabilities:
Short-term bank loans (Note 14) ¥ 19,220 ¥ 22,424 $ 159,445
Commercial paper 17,000 30,000 141,032
Current portion of bonds (Note 14) 10,000 12,000 82,960
Current portion of long-term debt (Note 14) 46,603 9,023 386,618
Current portion of lease obligations 2,933 3,068 24,330
Notes and accounts payable—trade 36,772 35,534 305,061
Liquor taxes payable 33,904 33,603 281,267
Income taxes payable (Note 16) 6,115 725 50,726
Accrued bonuses (Note 2 (k)) 2,220 2,116 18,417
Deposits received 8,824 9,651 73,204
Other current liabilities 50,054 53,629 415,250
Total current liabilities 233,644 211,772 1,938,311
Bonds (Note 14) 50,000 50,000 414,800
Long-term debt (Note 14) 91,919 124,110 762,562
Lease obligations 5,353 6,101 44,410
Dealers’ deposits for guarantees 32,833 32,337 272,384
Net defined benefit liability (Note 15) 7,636 4,511 63,350
Deferred tax liabilities (Note 16) 21,216 22,617 176,008
Other long-term liabilities 13,964 13,987 115,844
Contingent liabilities (Note 9)
Total liabilities 456,566 465,434 3,787,669
Net assets
Shareholders’ equity:
Common stock (Note 20)
Authorized — 1,000,000,000 shares
Issued — at December 31, 2015 393,971,493 shares 53,887 — 447,044
— at December 31, 2014 393,971,493 shares — 53,887 —
Capital surplus 45,914 45,913 380,901
Retained earnings (Note 7) 35,190 34,914 291,933
Treasury stock, at cost (1,596) (1,545) (13,240)
Total shareholders’ equity 133,394 133,168 1,106,638
Accumulated other comprehensive income:
Unrealized holding gain on securities 23,926 20,113 198,494
Deferred hedge gains (11) (0) (95)
Foreign currency translation adjustments (1,256) 2,583 (10,418)
Remeasurements of defined benefit plans (Note 15) 1,875 441 15,552
Total accumulated other comprehensive income 24,534 23,136 203,533
Minority interests 5,894 3,701 48,900
Total net assets 163,822 160,005 1,359,072
Total liabilities and net assets ¥620,388 ¥625,439 $5,146,740